Amity Shlaes: Watch Inflation Capsize US (Full Version)

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provfivetine -> Amity Shlaes: Watch Inflation Capsize US (3/18/2012 4:48:12 PM)

How fast can inflation hit? Real fast.

quote:

“Sudden” is more like it. The thing about inflation is that it comes out of nowhere and hits you. Monetary policy is like sailing. You’re gliding along, passing the peninsula, and you come about. Nothing. Then the wind fills the sail so fast it knocks you into the sea. Right now, the U.S. is a sailboat that has just made open water, and has already come about. That wind is coming. The sailor just doesn’t know it.
Link

Of course since she is routinely attacked by Paul Krugman, we know she speaks truth.



Owner59 -> RE: Amity Shlaes: Watch Inflation Capsize US (3/18/2012 4:50:56 PM)

Right right right ....the hyper infaltion doom and gloomers............[8|]


And one of you`re 1st posts was about how safe nuke plants are.....errrr were......[:D]


She couldn`t shine Krugmans shoes........



Edwynn -> RE: Amity Shlaes: Watch Inflation Capsize US (3/18/2012 7:11:04 PM)


Who cares what Krugman says (besides you), Shales is a nut case from the word go. In every example she gave she got the names right then the rest was 100% fiction. Her version of the Weimar hyperinflation was hilarious. What a dunce.





Musicmystery -> RE: Amity Shlaes: Watch Inflation Capsize US (3/18/2012 7:35:04 PM)

Additionally, with interest rates near zero, the Fed has uber-tools to use should this magic sudden inflation hit, tools they can use suddenly.



provfivetine -> RE: Amity Shlaes: Watch Inflation Capsize US (3/18/2012 7:57:47 PM)

quote:

ORIGINAL: Musicmystery
Additionally, with interest rates near zero, the Fed has uber-tools to use should this magic sudden inflation hit, tools they can use suddenly.


This is true, but raising rates would send the economy back into recession. Our economy is worse today than it was in the 80's when Volcker raised the federal funds rates to over 20%. A move that sharp would decimate the economy (in the short term). Plus Ben already pledged to keep these rates low until 2014.

Hyperinflation is unlikely unless there's an international run on the dollar or Congress takes autonomous control of the FED, but evidence of mass inflation is already developing.



Yachtie -> RE: Amity Shlaes: Watch Inflation Capsize US (3/18/2012 8:06:58 PM)


quote:

ORIGINAL: provfivetine

quote:

ORIGINAL: Musicmystery
Additionally, with interest rates near zero, the Fed has uber-tools to use should this magic sudden inflation hit, tools they can use suddenly.


This is true, but raising rates would send the economy back into recession. Our economy is worse today than it was in the 80's when Volcker raised the federal funds rates to over 20%. A move that sharp would decimate the economy (in the short term). Plus Ben already pledged to keep these rates low until 2014.

Hyperinflation is unlikely unless there's an international run on the dollar or Congress takes autonomous control of the FED, but evidence of mass inflation is already developing.


There may even be another way.

And therein lies the rub. As a reference, America currently has about $1 trillion of currency in circulation. If, and this is a big if, the gullible US consumer-cum-New Normal investor, does fall for the oldest herding trick in the book, and not only converts their bond holdings but their cash holdings into stocks, which in turn goes right into money velocity, into currency, and thus, into inflation, America may promptly find itself with the most unprecedented inflationary outcome it has ever experienced. Because while the Fed may have control over Excess Reserves, or so it believes, via the interest charged on overnight reserves, it will have absolutely no control over the herd mentality and the avalanche of money, should it proceed to rotate not so much out of bonds into stocks, but far more importantly, out of electronic cash (which for all intents and purposes is the US M2 these days), into the stock market.

Crude at $200 will then be the least of everyone's concerns.



provfivetine -> RE: Amity Shlaes: Watch Inflation Capsize US (3/18/2012 8:23:21 PM)

quote:

ORIGINAL: Yachtie

There may even be another way.



This is interesting, but if Americans happened to become weary of bonds at a massive level, then its unlikely that they'd flock to other paper assets (in the form of stocks), especially in the volume that is described in the article. If Americans do indeed become weary of bonds at this level, then a far more likely scenario is that they put this money into hard assets (metals, real estate, etc).



Edwynn -> RE: Amity Shlaes: Watch Inflation Capsize US (3/18/2012 8:34:06 PM)


Yes, that quantitative easing can be reversed a lot more quickly than it was implemented if need be.

Some do not understand the difference between a rise in price level and an actual meaningful increase in inflation. A cost-adjusted reasonable rise in price level would be a welcome thing right now. If producers have an inkling that would sustain, re-hiring and new hires come not long after. For the last few years prices have only risen by force, primarily from oil and its embedded cost. If instead some discernible bit of demand-pull inflation were to appear that would be indication that several good things are happening as far as recovery.

If we get to that point, then the increase in supply should hold inflation to normal levels.

Of course every little bounce and skip along the way will be a sign of today and forever disaster, just after all that euphoria we had from yesterdays news.





dcnovice -> RE: Amity Shlaes: Watch Inflation Capsize US (3/18/2012 8:41:56 PM)

<fr>

http://www.collarchat.com/m_4062613/tm.htm



provfivetine -> RE: Amity Shlaes: Watch Inflation Capsize US (3/18/2012 8:44:34 PM)

quote:

ORIGINAL: Edwynn
Yes, that quantitative easing can be reversed a lot more quickly than it was implemented if need be.


Sure, in theory. But Ben is not going to raise rates because he knows it will put the economy back in recession. He's also not going to raise rates in an election year.

quote:


Some do not understand the difference between a rise in price level and an actual meaningful increase in inflation.


The CPI is just a fraudulent measure of real inflation; it doesn't even include food or energy in it. The government and their economic henchman just look for rises in the core; if this doesn't rise, then there's "no inflation."



Edwynn -> RE: Amity Shlaes: Watch Inflation Capsize US (3/18/2012 8:46:48 PM)


Thanks, I missed that. I thought it would be about medicare or something so I never clinked on it.





provfivetine -> RE: Amity Shlaes: Watch Inflation Capsize US (3/18/2012 8:52:32 PM)


quote:

ORIGINAL: dcnovice

<fr>

http://www.collarchat.com/m_4062613/tm.htm


Thought that thread would be about this: http://www.youtube.com/watch?v=tTJwQ63A_r0



TheHeretic -> RE: Amity Shlaes: Watch Inflation Capsize US (3/18/2012 10:34:15 PM)


quote:

ORIGINAL: provfivetine


quote:

ORIGINAL: dcnovice

<fr>

http://www.collarchat.com/m_4062613/tm.htm


Thought that thread would be about this: http://www.youtube.com/watch?v=tTJwQ63A_r0



Books and covers, but carry on. [;)]

If I find a way to do the MediCare thread I'd like to do, it would probably have a playful title as well.



xssve -> RE: Amity Shlaes: Watch Inflation Capsize US (3/19/2012 9:04:11 AM)


quote:

ORIGINAL: provfivetine

quote:

ORIGINAL: Yachtie

There may even be another way.



This is interesting, but if Americans happened to become weary of bonds at a massive level, then its unlikely that they'd flock to other paper assets (in the form of stocks), especially in the volume that is described in the article. If Americans do indeed become weary of bonds at this level, then a far more likely scenario is that they put this money into hard assets (metals, real estate, etc).

Uh, this is most of the problem anyway, so much of M! represents debt, which isn't real money, or rather it represents theoretical rather than actual value, it's value that hasn't been created yet, but it's counted like it was real, and traded in liquid instruments like it was real.

They did write down a bit of it during the bailout, but it accounts for at least half of the global money supply.

There doesn't seem to be a glut of banknotes, in fact it was kind of tight there for a while, but loosened up a bit during the last round of stimulus.

Inflationary forces in the CPI at the moment have pretty much everything to do with fuel prices.



xssve -> RE: Amity Shlaes: Watch Inflation Capsize US (3/19/2012 9:11:33 AM)

In fact so much paper wealth was being written down Two or Three years ago, the Fed was more worried about deflation than inflation.



Yachtie -> RE: Amity Shlaes: Watch Inflation Capsize US (3/19/2012 9:13:44 AM)


quote:

ORIGINAL: xssve


quote:

ORIGINAL: provfivetine

quote:

ORIGINAL: Yachtie

There may even be another way.



This is interesting, but if Americans happened to become weary of bonds at a massive level, then its unlikely that they'd flock to other paper assets (in the form of stocks), especially in the volume that is described in the article. If Americans do indeed become weary of bonds at this level, then a far more likely scenario is that they put this money into hard assets (metals, real estate, etc).

Uh, this is most of the problem anyway, so much of M! represents debt, which isn't real money, or rather it represents theoretical rather than actual value, it's value that hasn't been created yet, but it's counted like it was real, and traded in liquid instruments like it was real.



Real enough that the lender expects to be repaid and the borrower is on the hook for it; like student loans. The fact that it isn't necessarily cash is where many go wrong. [The money multiplier is as relevant to digital money as cash. If it weren't your cash would not be devaluing.]



Musicmystery -> RE: Amity Shlaes: Watch Inflation Capsize US (3/19/2012 9:21:10 AM)

quote:

isn't real money


I think you're confusing money with physical assets.

No money is "real" except by commonly accepting it as a medium of exchange, store of value, and unit of account--whether coffee beans, sea shells, pounds of salt, gold, silver, coins or paper currency.



xssve -> RE: Amity Shlaes: Watch Inflation Capsize US (3/19/2012 9:27:00 AM)

Re: Krugmans editorial, and republican policy in general, the multiplier value of of interest as wealth is based on willingness to pay and ability to pay - and includes appreciation in any assets used to secure the loan in a default, which is why so much paper wealth simply evaporated on contact with reality back in '07.

Lowering wages would tend to have a negative effect in all this, I should think, and any way you look at it, ongoing Keynesian stimulus is the only way out here, even with a little inflation.

The political problem with that, is that it means banks take the hit if CPI is compensated with rising wages, so I think the Fed's gonna keep playing with the line here, I don't see any bold strokes in the offing, Bernanke's gonna keep trying to finesse it.

A massive infrastructure investment is what is called for, for more reasons than one, but George W's massive debt increases make's that problematic, given that the bills on that are still coming in every year like clockwork, on top of rising mandatory expenditures - doesn't give Obama much wiggle room, and limits how much money Bernanke can print.



xssve -> RE: Amity Shlaes: Watch Inflation Capsize US (3/19/2012 9:35:41 AM)

Yes, "real money", as in money that represents actual assets, and goods and services being exchanged, as opposed to money that represents assets, goods and services that are presumed to be created and exchanged at some future date.

Some of that is obviously necessary, fiat currency itself is basically an IOU, and new wealth creation has to be financed somehow, if it isn't going to get zero sum, i.e., credit is a necessary tool for economic expansion - but it ain't magic, and in any credit scheme, the subsequent production of real performing assets is the difference between economics and magical thinking.

In this case, just like in the 80's S&L debacle, credit was extended to make a buttload of heavily inflated, nonperforming assets i.e., it looked like real money, but it turned out not to be. It seems to happen in every republican administration anymore, they really love those real estate bubbles.



xssve -> RE: Amity Shlaes: Watch Inflation Capsize US (3/19/2012 10:00:07 AM)

The real problem with this economy is the income gap - builders and start up's are universally aiming at the high end of the market - that creates the bubble, which pops when that market becomes saturated - happened with commercial real estate in the Eighties - giant malls that were turned into indoor flea markets and professional plaza's turned into thrift stores and fly by night electronics wholesalers.

Happened with the tech bubble, now with domestic housing - the upper quintile buying houses and selling them to each other - some of these people bought Three or Four houses and have never even seen them - when that market was saturated, then oversaturated, brokers started unloading them on high risk borrowers that really couldn't afford them, and the investment banks didn't perform due diligence on the brokers till they were already in the shit.

It's a classic scenario, and you either have to find a way to incentivize building affordable housing or accept massive deflation in the current market - which is pretty much what happened already due to Bush's lousy job creation - most of the jobs he did create evaporated with the housing market, and household incomes are falling off all across the lower deciles.

Which bodes not well for the housing market in the long term, which I think bottomed and started to recover around November last year - I just don't think anybody is paying attention to why all this happened, and chance are good they're gonna turn right around and do it again, like flies banging against a window pane.



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